Contractual time-bar extinguishing claims was void under section 28, so the arbitral award based on it was set aside.

A contractual clause requiring a demand for arbitration within 90 days of intimation that the final bill was ready for payment, and extinguishing the contractor's claim on expiry of that period, was held to fall within section 28 of the Indian Contract Act, 1872 because it restricted enforcement of contractual rights and discharged the employer from liability. The arbitral award could not be sustained since the arbitrator rejected the claims solely on that unenforceable time-bar without examining the merits. The award was set aside and the dispute remitted for adjudication on merits by the arbitrator or a substitute arbitrator, if necessary.

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Issues: Whether a contractual clause requiring a demand for arbitration within 90 days of intimation that the final bill was ready for payment, and extinguishing the contractor's claim on expiry of that period, was hit by section 28 of the Indian Contract Act, 1872, and whether the award holding the claim time-barred could be sustained.

Analysis: The contractual stipulation made the contractor's claim cease after the expiry of a specified period and operated to discharge the employer from liability in respect of such claim. Such a term restricted the enforcement of contractual rights and fell within the prohibition contained in section 28 of the Indian Contract Act, 1872. Since the arbitrator rejected the claims only on the ground of limitation arising from that clause, the claims were not examined on merits.

Conclusion: The clause could not be enforced to defeat the claim, and the award based on that clause was liable to be set aside. The objections were allowed and the matter was remitted for decision on merits by the arbitrator or a substitute arbitrator, if necessary.

Final Conclusion: The arbitral award could not stand because it rested on an unenforceable contractual time-bar, and the dispute was sent back for adjudication on merits.

Ratio Decidendi: A contractual term that extinguishes a party's rights or discharges the other party's liability on expiry of a specified period, so as to prevent enforcement of contractual rights, is void under section 28 of the Indian Contract Act, 1872.

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